Office Sales Volume on Track to Surpass Last Year’s Total
With investment volume poised to exceed 2020’s, the office market is still navigating fallout from the health crisis.
- Direct asking office rents averaged $38.62 per square foot in September, 10 cents lower than the previous month and up 1.2 percent from the same period last year.
- Office vacancy declined slightly, averaging 14.9 percent across the top 50 U.S. office markets.
- Office-using sectors encompassed nearly half of the job growth last month.
- National office transaction volume totaled $53.3 billion in September.
Transaction volume totaled $53.3 billion in the first three quarters of the year, with office investment expected to exceed last year’s $61.8 billion total. Despite the positive number, office sales volume hasn’t reached pre-pandemic levels. However, markets—such as Atlanta—more than doubled last year’s sales volume; Investment volume was concentrated in high-growth biotech clusters, with the Bay Area, Boston and San Francisco taking the lead thanks to ongoing demand for life science space.
Asking Rates, Vacancy, Inch Down
National office asking rates recorded a 10-cent decrease from the month prior, averaging $36.82 per square foot. However, the rate was up 1.2% year-over-year. Following a similar pattern, office vacancy stood at 14.9 percent, 50 basis points lower than in August, but up 130 basis points year-over-year in September.
Most markets recorded a slight decrease in vacancy from the month prior but more significant gains on a year-over-year basis, largely due to a recent surge in deliveries. As an example, vacancy in Austin recorded a 510-basis point increase from September 2020, with deliveries from 2017 onwards accounting for 15 percent of total stock.
Market Cores Drive Construction Activity
A little over 158 million square feet of office space was under construction across the nation as of September, with two-thirds rising in urban submarkets or Commercial Business Districts. Only 36.2 million square feet of office space broke ground year-to-date in September, significantly less than the 87.2 million of new construction starts in 2019. While markets such as Austin, Nashville and Boston lead the way in construction activity, the office boom in Denver seems to have come to an end. Less than one million square feet was under construction at the end of September, accounting for 0.6 percent of total stock.
Read the full Matrix Office National Report-October 2021